Jaffe: Put market worries to rest for the holidays

How’s the market doing?’ Why do you care?
A year ago at this time, it seemed like everyone I ran into while out around the holidays was asking about my health, the result of a scare just months earlier.

This year, I’m pleased that no one has reason to be concerned with my health, but I’m alarmed by the question I am getting constantly now – namely some variation on “What’s the market doing?”

That interest, of course, is the result of the fear that the market has given investors – and is likely to continue dishing out – over the course of the last 12 months. In some instances, it’s people literally interested in knowing where the Dow Jones Industrial Average is at for the day, while for others “now” is more about what’s happening year-end and whether there is likely to be a January effect to make stocks pop in 2012.

But if ever there was a time when you’d think folks would be willing to focus on the big things in their life and ignore the little ones – like the daily market action – it would be around the holidays.

Not to be Scrooge about it, but I quash the “How’s the market?” talk quickly, because my answer is always the same: “Tell me why it’s important to you, and I’ll let you know what the market is up to now.”

The key words here are “Important” and “now,” because the market and the economy are important over the lifetimes of consumers and investors but, unless someone is a trader or following a strategy that requires constant oversight to work, not particularly important on any given day.

Years of working in the media have convinced me that a large measure of market talk about “what moved the market today” is hogwash. Truthfully, if the market moves by a percentage point or two on any given day, most pundits are taking nothing more than an educated guess as to what caused the action. They know their thinking – right or wrong – will be largely forgotten the next day, when there will be another opportunity to say something that sounds smart (thereby making the investment firm sound smart, no matter how accurate the information).

Moreover, for the vast majority of investors, the information is interesting, but not useful. Barring some ability to day-trade or create a computer-driven trading algorithm, it’s outrageously hard to consistently capture the market’s tiny moves.
That’s why “what’s happening today” is not particularly important, because no matter what direction the market moves or how violently it lurches, the average investor is not going to look back on the event and say “That day is the reason why I can’t retire on time,” or “That’s the day when the market made me rich.”

That applies no matter what the market does on any given day. Look at the worst days in market history or the best ones; unless you made major moves at the absolute best or worst times, they did not make or break a lifetime’s worth of investing.

The point here is not that investors should buy and hold forever, because that’s not a strategy so much as a default. It’s that the shortest time frames belong to the pros, the folks trying to squeeze an extra penny out of some momentary market move, the ones conditioned to act not on what’s happening “now,” but what’s moving “at this instant.”

Assuming you are not equipped to hand-fight with those guys, broaden your time horizon. Instead of worrying about what the market is doing now, consider what it is doing “next” – provided that you don’t mean “next week” but rather “the next year,” “next half-decade” or beyond.

Armed with that, you can shake a few of the day-to-day, minute-by-minute worries that arise in the world of the 24-hour business cycle, with know-it-all Tweets from folks who may mean well, but who don’t have your best interests at heart. You can make it so that the day-to-day noise of the market doesn’t crowd into your more important thoughts, like how to best spend time with your family over the holidays and beyond.

Much as the market will be described as giving investors some sort of Christmas present if it rallies near the end of the year, a hangover if it falters after New Year’s Eve and other human characteristics, it’s important to remember that the market doesn’t know when your kids are going to college, or you have a wedding to pay for, or you plan to retire. Neither do the talking heads and the people purporting to have the knowledge to make short-term market calls that could help you navigate the “now.”

Maybe the holidays are the time to give the markets a “Bah humbug,” and to look at the big picture and what’s really important. Perhaps we’d all be better off catching up with family and friends than catching up on what Mr. Market is doing right now.
If that’s the case, then let’s hope people who grab the holiday spirit this year keep it all year long – and beyond.
Chuck Jaffe is senior columnist for MarketWatch.